The Board of Supervisors has
previously received a Memorandum of Law setting forth funding options for the
County to participate in funding the proposed Meadowcreek Parkway interchange
located in the City of Charlottesville. One possible funding option involved
the creation of a multi-member transportation district by the County and the
City. The Board requested additional information and analysis regarding how a
transportation district might be funded.

STRATEGIC PLAN:

4. Serve the Public
Efficiently and Effectively.

DISCUSSION:

The only practical
transportation district enabled by the Virginia Code is one created pursuant to
Virginia Code Title 15.2. As set forth in the attached Memorandum of Law, such
a transportation district has broad powers and can be a means to address
transportation projects on a regional basis. However, the enabling legislation
is limited in that it does not generally provide any taxing authority for a
transportation district. Without direct taxing authority, any local revenue to
be used by a transportation district would have to come from appropriations made
by the City and County. For a county, this revenue by necessity would be
general fund revenue or proceeds from a bond issue that was approved by a
majority vote of the county’s voters. Without a guaranteed revenue source, a
transportation district is unable to issue revenue bonds to finance major
projects.

There is precedent for the
General Assembly to grant special taxing authority to a transportation
district. In 1980 the General Assembly authorized the imposition of a motor
vehicle fuels tax for the Northern Virginia Transportation District. That
authority enables the transportation district to impose a two percent sales tax
on all motor vehicle fuels sold within the district. However, the General
Assembly has not extended that authority to any other existing or proposed
transportation districts. In fact, in the 2004 Session the request for this
authority by localities in the Fredericksburg region was defeated in the House.
To extend such authority to a transportation district within the City and
County, Section 58.1-1720 of the Code of Virginia would need to be amended by
the General Assembly to specifically enable the taxing authority.

A possible alternative
source of local funding that could be used by the City and County to fund a
transportation district is to separately create a joint service district to
provide transportation services within a service district having the same
boundaries as the transportation district. The City and County have authority
to impose a special service district tax on the real property within the service
district to be used to fund transportation improvements. There is no statutory
limit as to the amount of such service district tax. Those funds, which are
required to be segregated and used only for the purposes of the service
district, could then be appropriated to the transportation district to construct
the transportation projects. Although bond counsel has advised that the County
cannot use service district taxes as the basis for revenue bonds, revenue
generated by the service district tax that is committed to a transportation
district could be the basis for revenue bonds issued by the transportation
district. The service district tax would be collected by the City and County as
a separate line item on the real estate tax bills and appropriated annually to
the transportation district. This approach has not been used by any locality to
date.

RECOMMENDATIONS:

Without a dedicated funding
source, a transportation district has no legal authority to generate local
revenue and no apparent basis to issue revenue bonds necessary to fund major
transportation projects. Before establishing a transportation district, staff
recommends that the Board identify a dedicated funding source for the
transportation district.

One possible funding source
is a motor vehicle fuels tax. If the Board supports this tax option, the Board
must ask the General Assembly to amend Virginia Code Section 58.1-1720 to enable
such a tax within the City and County. It is estimated that a two percent tax
would generate in excess of three million dollars of revenue annually.

Another possible funding
source would be proceeds from a general obligation bond issued by the County.
Such a bond would require approval by a majority vote of the County voters in a
general referendum. A property tax rate increase, subsequent to a general
referendum, may be necessary to pay the debt service for a general obligation
bond.

A third possible funding
source is the creation of an overlapping service district. If the Board
supports this option, the Board must be committed to imposing a new dedicated
property tax in the service district for the purpose of funding transportation
district projects. The amount of the tax would depend on the cost of the
projects and the ability to leverage the revenue by having a transportation
district issue debt in the form of revenue bonds.